Is The Bank Of England Set To Tackle Inflation?

Comments being attributed to those in high positions in the Bank of England are giving the impression that UK interest rates may rise which is totally at odds with comments from the Governor of the Bank just a week ago. Tim Besley, who is a member of the influential MPC, has suggested that inflation needs to be 'nipped in the bud' otherwise we risk a return to the inflation ravaged economy of the 1970s where pay rises were forever rising and strikes we being called on a regular basis - sound familiar?

While the 'nip in the bud' comment seems to suggest that rates could rise for a short while to curb inflation it is not as easy as that. A rise in interest rates today would not affect the rate of inflation until months down the line although the economy could lurch further down in the short term on perceived fears and reduced confidence in the UK.

As we see a number of inflation bursting pay deals announced and strike numbers picking up again it seems that inflation has returned to the fore. As many expect inflation to be well above 4% for the next two years this does not bode well for the hoped for revival in UK fortunes.

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